Single Market: business survey reveals positive effects feeding through to companies

The vast majority of companies large and small are participating actively in the Single Market by buying, selling and manufacturing in other Member States, according to an opinion poll carried out for the European Commission in September 1998 of more than 4000 business executives. Most companies consider the Single Market has had a positive effect on their business over the last 2 years, and a small majority of large companies consider that trade barriers are decreasing. However, companies identified a considerable range of trade barriers that continue to prevent them realising the full benefits of the Single Market and two thirds of companies did not attempt to challenge these barriers. The results of the business survey are featured in the October 1998 issue of the Single Market Scoreboard (see IP/98/952).

Participation in the Single Market

82% of companies surveyed actively participate in the Single Market, through exporting, directly sourcing goods or services, manufacturing or providing services in another Member State. All sizes of company exhibit high rates of participation: 92% of large companies (those with more than 250 employees), 87% of medium sized firms (50-249 employees) and 77% of small companies (10-49 employees) do business in at least one other Member State.

Perceived effect of the Single Market over the last two years

Very positive

3%

Positive

24%

Equally positive and negative

7%

No impact

57%

Negative

6%

Very Negative

1%

Don't know

2%

Significantly, companies from the 3 newest Member States perceived the impact of the Single Market most positively (51% of Finnish and Austrian companies and 46% of Swedish companies reported the Single Market had benefited their companies' performance). This seems to indicate a certain maturity of the Single Market, with those participating in it longest building their perceptions of its benefits into their normal expectations of the business environment.

In general, larger companies operating in the Single Market were more positive than the small and medium sized companies (SMEs). Of large companies, 41% thought that the Single Market had affected their company positively in the last 2 years, compared with 28% of medium-size companies (50 to 250 employees) and 23% of small companies (10 to 49 employees).

How have barriers to trade in other EU countries developed over the last two years?

Disappeared

13%

Significantly reduced

16%

Tend to decrease

23%

Unchanged

28%

Tend to increase

5%

Don't know

15%

This table hides some variations amongst the different sized firms, 50% of large companies said that they had seen a reduction in barriers to doing business, whilst only 37% of SMEs claimed that obstacles to doing business in the Single Market had decreased.

Nature of barriers in the Single Market

Additional costs to render products or services compatible with different national specifications

41%

Unusual testing, certification or approval procedures

34%

State aids favouring competitors

31%

Difficulties related to the VAT system and VAT procedures

28%

Restrictions placed on market access, due to exclusive distribution networks

25%

Off-putting or discriminatory behaviour of certain national administrations

25%

Discriminatory practices of awarding authorities in public procurement markets

20%

Market access requiring rights or licences in the hands of local competitors

19%

Costly financing arrangements for cross-border transactions

18%

Lack of legal security of cross-border contracts/transactions

18%

Other legislative or regulatory obstacles

15%

Outright refusal (by public authorities) of permission to sell products or services legally marketed in other European Union countries

14%

Insufficien t protection of trade marks

13%

Insufficient protection of technological inventions

12%

Insufficient protection of copyrights

11%

These results have changed very little from September 1997, when the Commission first conducted such a business survey (see MEMO/97/99). Although not strictly comparable, the results are remarkably uniform - the main concerns last year were VAT (38%), obligations to modify products or services for national specifications (36%) and unusual testing, certification and approval procedures (35%).

Around 15% of firms reported that public authorities had refused permission outright for companies to sell their products or services legally marketed in other Member States. This confirms the Commission's view that the procedure established under the Decision 3052/95/EC (see IP/97/3), for notification of such refusals to the Commission, is underused.

Persistence of barriers

Companies thought that the persistence of these obstacles to trade and business activities could be attributed to the lack of uniform European rules (35%), the lack of information about EU rules (25%), overly complex legislation (25%), over-zealous application of national rules by public authorities (24%) and lack of familiarity on the part of public authorities with the applicable rules (16%). These responses are broadly similar regardless of the size of company.

Problem solving

Faced by a barrier to doing business in the Single Market, two thirds of companies (67%) had not undertaken any action to overcome it. The smaller the firm, the less likely it is to take action - 70% of small companies and 65% of medium sized companies have not taken action, but even a majority of the larger companies operating in the Single Market (57%) have not taken steps to overcome the obstacles they have faced. Where they do try to solve problems, businesses tend to use trade associations, chambers of commerce or their own networks. Use of administrations, national or at European level, as a form of recourse is not popular with most firms regardless of size. However, it is a means which larger companies will use more often than smaller ones. The findings underline the importance of making means of redress more accessible and effective, notably at the national level.

The role of information in overcoming barriers

One of the important factors that the survey has highlighted is the role of information for those doing business in the EU. Only 26% of companies say they have all the information they need to do business with other EU countries. 58% of companies think that it is likely that access to information would enable them to expand their activities within the EU.

When asked to identify their information needs, 74% of all companies said precise, good quality information about the standards applied to their products and services was crucial or at least important. Approximately an equal number (72%) stated information about VAT, tax and fiscal rules (72%). Two thirds of firms (66%) identified their need for precise information about administrative procedures in general and environmental regulations. Response to these questions were similar from SMEs and larger companies.

Administrative burdens

Some 18% of companies think that administrative burdens have decreased with regard to trading in the Single Market over the last 2 years, but only 4% believe that they have been significantly reduced. 39% think they have stayed the same, and 37% think they have increased. Large companies tend to view developments more favourably than SMEs. Amongst large companies, 20% think administrative burdens have decreased (SMEs 17%), whereas 30% think that they have increased (SMEs 38%).

Companies' priorities for steps to improve the legislative environment:

Simplify the applicable legislation

73 %

Provide clearer and simpler instructions

on how to comply with legislation

53 %

Streamline overlapping formalities

42 %

Provide a predictable legal framework

23 %

Priority areas identified by companies for simplification of administrative procedures:

Fiscal and tax rules

76 %

Product and services regulation

53 %

Environmental legislation

31 %

Labour and social regulation

26 %

Other

4 %

Concluding remarks

Most firms believe that there are still some barriers to doing business in the Single Market, with the majority thinking these are due (at least in part) to the manner in which rules and regulations are applied. Many of the obstacles are related to compliance with national specifications for goods and services, VAT systems, and discriminatory behaviour by public authorities and so have not changed to any great extent over the last 12 months. Similar numbers of firms seem to face such barriers, and few firms seem to consider it worthwhile to try to tackle them. Not surprisingly, companies' information needs and their priorities for improvements in administrative procedures reflect the nature of the barriers they are facing.

The Single Market Observatory of the Economic and Social Committee has also recently completed a survey of trade associations views on the Single Market and remaining barriers within it, the results of which closely mirror the findings in the survey conducted for the Commission (for further details the e-mail address is smo@ces.be)

Further details of the Scoreboard business survey will be available from the Europa server on the World Wide Web: http://ec.europa.eu/dg15